Price Analysis Techniques With any purchase of goods or services, including sole source items, some type of cost analysis is required. A part of this analysis is verification of pricing. There are many ways to analyze the pricing of a product or service. Some of the techniques recommended include:
Frequently Asked Questions Q. What is the difference between a cost analysis and a price analysis? Price analysis would not be suitable, for example, for research and development items, or for one-of-a-kind items for which there was no basis of comparison.
A cost analysis will be appropriate in the following situations: The product or service being offered is not susceptible to being evaluated against other commercially available items of similar products or services. Examples would include a procurement for professional services where no competing price proposals are submitted, as in a procurement for architectural-engineering services where only one cost proposal is solicited from the highest ranking firm, or a sole-source procurement for other types of services.
When change orders are issued to contracts requiring the contractor to do work whose cost can only be evaluated by examining the various cost elements, such as labor, materials, travel, etc. July, Back to top Q. For sole source small purchases and micro-purchases, is a cost analysis always required?
Every contract award must include a determination that the price is fair and reasonable. The extent of the analysis depends on the value and nature of the contract.
For small purchases that are sole sourced, it would depend on the nature of the product or service. For example, if the procurement was for standard commercial items sold in substantial quantities to the general public, then a price analysis would be sufficient.
If the procurement were for services, then some breakdown of the price would be required to determine that the labor hours, rates, profit, etc. What is the formula for calculating the competitive range between offers? The determination of which proposals to include in the competitive range is a subjective one and should normally include all those offers that stand a reasonable chance of being selected for award, considering all evaluation factors, including price.
FTA has not established a dollar threshold for conducting pre-award audits of contractor cost proposals. The BPPM is available online: A cost analysis will be necessary whenever adequate price competition is lacking and for sole source procurements, including contract modifications or change orders, unless price reasonableness can be established on the basis of a catalogue or market price of a commercial product sold in substantial quantities to the general public or on the basis of prices set by law or regulation.
So too will all negotiated procurements that are sole-source. We would also include competitive cost-type contracts where offerors are not committing to fixed prices and are submitting cost elements for evaluation and negotiation.
But FTA leaves this judgment to the grantee.
For example, the grantee may have current audit information for a particular contractor on hand from a recent procurement and related pre-award audit.
In this case a pre-award field audit may not be required; a desk review would suffice. But where cost elements have to be evaluated in order to conduct negotiations, and current audit data is not available, it will generally be necessary to conduct a pre-award audit in order to determine reasonableness.
May Back to top Q. We issued an IFB for crossing panels to 15 potential suppliers, but we received only one bid. Most bidders failed to bid due to overload from rail companies. Similar products have been procured by other light rail transit agencies.
Crossing panels are made of steel and concrete. However, both steel and concrete are being sold at a premium at this time. Can we perform a price analysis or must we perform a cost analysis? Do the results of the analysis have to be reported to the FTA region offices?Price Analysis in Various Situations Price analysis is a price comparison of a proposed price without analyzing any of the separate cost of elements that it’s composed of.
With any purchase some type of cost analysis is completed in order to .
Recognize situations where price indexing is an appropriate method of price analysis. Given a data set, calculate a price estimate through price indexing.
Recognize situations where Cost-Volume-Profit analysis is an appropriate method of price analysis. (2) The Government may use various price analysis techniques and procedures to ensure a fair and reasonable price. Examples of such techniques include, but are not limited to, the following: (i) Comparison of proposed prices received in .
(2) The Government may use various price analysis techniques and procedures to ensure a fair and reasonable price. Examples of such techniques include, but are not limited to, the following: (i) Comparison of proposed prices received in response to the solicitation.
In these situations, it may be necessary to rely on a technical analysis. While time consuming, this is the best method to use when validating price for complicated sole source items. In this analysis, the supplier of the goods or services is asked to provide.
A “price analysis” will be the usual procedure followed in a competitive situation and in situations where items are being procured which are sold in the commercial marketplace to the general public. Section - "Cost and Price Analysis,” discusses various forms of price analysis techniques, including adequate price competition.